PA Judge Denies Cannabis Company’s Motion to Dismiss Delivery Driver Misclassification Claims

On March 7, 2023, the Honorable William S. Stickman IV of the Western District of Pennsylvania denied a motion to dismiss filed by medical cannabis company FarmaceuticalRX LLC (“FRX” or the “Company”) in a class action lawsuit alleging the Company misclassified delivery drivers as independent contractors and failed to pay overtime wages.

In August 2022, FRX delivery drivers Clint Goodenow, Jason Hummel, Alex Fitzgerald, Brian DeMarco, and Mark Williams (collectively, “Plaintiffs”) filed a complaint alleging that FRX violated the Fair Labor Standards Act (“FLSA”), a federal law that protects workers from unfair employment practices by establishing requirements for minimum wage, overtime pay, recordkeeping, and child labor.

Specifically, Plaintiffs alleged that FRX willfully misclassified them as independent contractors despite exercising “complete control over all aspects of [their] work and subject[ing] [them] to numerous policies.” Plaintiffs argued that they regularly worked over 40 hours a week but did not receive overtime pay, a violation of the FLSA and Pennsylvania Minimum Wage Act (“PMWA”). Moreover, Plaintiffs claimed that they repeatedly complained about their misclassification and the lack of overtime compensation, to which FRX responded with a variety of excuses for not to providing employment status, including that correcting the misclassification in the middle of the year would trigger an Internal Revenue Service audit. In May of 2022, the Company “constructively discharged Plaintiffs in retaliation for their complaints about FLSA and PMWA violations.”

In their brief opposing the Company’s motion to dismiss, Plaintiffs claimed that FRX issued paychecks and tax forms for drivers, covered their insurance, and set and controlled their schedules, further supporting the case that they were employees rather than independent contractors.

In his memorandum opinion denying the Company’s motion to dismiss the complaint, Judge Stickman enumerated six factors courts consider when evaluating “the total employment situation and the economic realities of the work relationship”: (1) the alleged employer’s control over how work is performed; (2) the alleged employee’s opportunity for profit or loss depending on managerial skill; (3) the alleged employees investment in equipment, materials, or helpers; (4) whether the work requires a special skill; (5) the permanence of the working relationship; and (6) whether the service is integral to the alleged employer’s business. Judge Stickman found that Plaintiffs provided enough evidence to prove that they solely transported FRX products using company vehicles, worked exclusively for the company, and were an integral part of the business, ultimately concluding the drivers sufficiently pled the existence of an employer-employee relationship.

Updates will be posted to this blog as the matter progresses. The case caption is DeMarco et al. v. FarmaceuticalRX, LLC et al., case no. 2:22-cv-01164, filed in the United States District Court for the Western District of Pennsylvania.

The legal team at Miller Shah LLP has extensive experience representing misclassification and wage and hour violation matters. If you have any questions regarding this subject or this post, please contact Chiharu Sekino (cgsekino@millershah.com) or Anika Keuning (askeuning@millershah.com). The Firm can also be reached toll-free at (866) 540-5505.

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